Money blues: Why's the economy going South?

"Currency developments validate predictions made some time ago. The high interest rate environment will be a new reality accompanying us for several years," former Minister of Finance Constantinos Petrides stated in a post on the platform 'X'.

Mr. Petridis emphasizes that "Cyprus is one of the few countries experiencing a contraction in GDP compared to the previous quarter (the 3rd worst performance). This records a negative trend that cannot be ignored. Therefore, the trend cannot be attributed either to the international environment or to the more restrained monetary policy of the EU, the results of which come with a delay.

Even countries with a negative growth rate compared to the corresponding quarter of the previous year exhibit a positive growth rate compared to the previous quarter and are on a path to recovery.

1. Η Κύπρος είναι από τις μόνα κράτη με συρρίκνωση ΑΕΠ σε σχέση με το προηγούμενο τρίμηνο. (3η χειρότερη επίδοση). Αυτό καταγράφει μια αρνητική τάση που δεν μπορεί αγνοηθεί. Επομένως η τάση δεν μπορεί να αποδίδεται ούτε στο διεθνές περιβάλλον, ούτε στην πιο συγκρατημένη… pic.twitter.com/9UTB0imTrU

— ConstantinosPetrides (@Petrides_C) August 17, 2023

This negative trend, for those who seek accurate conclusions (government and parties ought to), must be analyzed alongside other indicators of macroeconomic imbalances. These indicators, in combination, create an explosive environment for economic and social stability.

Some of these indicators are due to structural issues, while others can result from short-term manipulation. For example, public finances, which due to populist policies, have deteriorated rapidly in recent months.

Currency developments validate predictions made some time ago. The high interest rate environment will be a new reality accompanying us for several years. However, the outcomes of this new monetary reality have not yet become evident. Sensible policies are even more pressing in this environment."